Is it time to invest in ETFs such as the BetaShares Legg Mason Emerging Markets Fund (Managed Fund) ETF (ASX: EMMG) and iShares FTSE China Large-Cap ETF (ASX: IZZ)? These two ASX ETFs operate in the International shares sector, and aim to make investing in it as convenient as possible.
1. The BetaShares EMMG ETF (ASX:EMMG)
The BetaShares Legg Mason EMMG Fund is a concentrated and actively managed portfolio of emerging global equities. This fund aims to outperform the MSCI Emerging Markets Index, over a 5 year period.
As at the end of last month, the EMMG ETF had $10.12 million of money invested. Since its funds under management (FUM) or ‘market cap’ figure of less than $100 million, it’s important to consider if this ETF is still too small. At Best ETFs we say an ETF with more than $100 million invested is typically more sustainable than one with less than $100 million (at least). However, there are exceptions to this rule of thumb, especially if the ETF issuer/provider is committed to growing the ETF’s FUM to the point where it becomes profitable.
Fees & costs
The yearly management fee on the EMMG ETF is 1%. The issuer, BetaShares, takes this out automatically.
What this fee means is, if you invested, say, $2,000 in the EMMG ETF for a full year you could expect to pay management fees of around $20.00. This fee is different from the fee you pay to your brokerage provider (e.g. CommSec, NabTrade, SelfWealth, etc.) to buy or sell the ETF. Importantly, you should also be mindful of the ‘spread‘ for the ETF.
Is the ETF too expensive?
The easiest way to know if the ETF is too costly is to compare it with other ETFs in the same sector, and against the industry average. The average management fee (MER) across all of the ETFs covered by Best ETFs Australia is 0.54%, which is around $10.80 per $2,000 invested. Small changes in fees can make a big difference after 10 or 20 years. To understand all of the fees, you should read the EMMG Product Disclosure Statement (PDS), available on the ETF issuer’s website, because it has the complete and up-to-date information.
These are just the basics of the EMMG ETF. To learn more, access our free investment report.
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2. The iShares IZZ ETF (ASX:IZZ)
The iShares IZZ ETF provides investors with exposure to the 50 largest and most liquid companies in China which are listed on the Hong Kong Stock Exchange.
At the end of April 2020, IZZ’s FUM stood at $102.61 million. With IZZ’s FUM over $100 million, we say the ETF has met our minimum criteria for the total amount invested. However, in reality, a very sustainable ETF in the Index sector should be able to scale well beyond that amount.
Are IZZ’s fees too high?
iShares charge a yearly management fee of 0.74% for the IZZ ETF. Meaning, with $2,000 invested for 12 months you can expect to pay a base management fee of around $14.80.
The management fee is above the average for all ETFs on our radar, but keep in mind the ETF may be able to justify it.
Before you read the Product Disclosure Statement (PDS) or speaking to your financial adviser about the EMMG ETF report. Take a look at our free investment report.
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